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January 9, 2024

The holidays have come and gone. Reality is starting to set in, and maybe you aren’t too fond of the financial aftermath. But holiday debt doesn’t have to linger for too long. Creating a solid recovery plan can ease the added financial stress. Plus, you can bounce back sooner rather than later.

Assess the Damage

Before you can start to recover from holiday debt, you need a clear understanding of the damage. Begin by gathering your credit card (and loan) statements. Once you have them, list all debt incurred during the holidays.

Also, jot down the total balance for each, along with the interest rate and monthly payment. Keep this information handy, as you’ll need it shortly.

Create a Financial Recovery Plan

Next, you’ll focus on creating a plan to get your finances back on track.


Develop a Post-Holiday Budget

Start by creating a spending plan if you don’t already have one. It should be realistic and account for all your monthly expenses and income. Once you run the numbers, write down how much extra you can afford to pay each month.

Ideally, it would be best to have some wiggle room. If you don’t, look at expenses to scale back or eliminate. Also, explore ways to increase your income. This could include taking on a part-time job, working overtime, or selling items you no longer need.

Set Realistic Repayment Goals

Revisit your list and compare it to your monthly repayment budget to set realistic goals. As an example, let’s say you have the following holiday debt:

  • Credit card 1: $500 balance, 24.99% APR, $25 minimum monthly payment
  • Credit card 2: $750 balance, 27.99% APR, $50 minimum monthly payment
  • Credit card 3: $1,000 balance, 25.99% APR, $75 minimum monthly payment

If your monthly holiday debt repayment budget is $250, you can afford to pay an extra $100 monthly.

Choose a Debt Repayment Strategy

You could randomly pick a card or loan to allocate the extra funds each month, but a better idea is to adopt a debt repayment strategy to simplify the process. 

There are two popular options to choose from: 

  • Debt snowball: Using the example above, focus on the debt with the smallest balance first. So, you’d start by paying extra on credit card 1 monthly and, once it’s paid in full, move on to credit card 2. Pay off that card and then focus on credit card 3. 
  • Debt avalanche: First, focus on the debt with the higher interest rate. So, you’d start with credit card 2, then move on to credit cards 3 and 1.

Regardless of your chosen method, it’s vital to continue paying the monthly minimums. Doing so keeps your accounts in good standing and protects your credit health.

Stay Motivated and Avoid Future Debt

Depending on how much you owe, eliminating holiday debt may seem like more of a marathon than a sprint. The key is to stay motivated and focus on the long-term goal of achieving financial freedom. Be proactive and consistent with your efforts until the balances are paid in full.

Also, consider establishing an emergency fund to avoid falling back into debt. It should cover at least 3-6 months of living expenses. And regularly review your spending habits. Adjust your budget if you find areas where you're overindulging. Reflection is a powerful tool for maintaining financial discipline. Most importantly, celebrate the small wins along the way to stay motivated.

The Bottom Line

Remember, recovering from debt is a journey. You're paving the way to a debt-free future by staying motivated and employing sound financial strategies. And with the right plan and discipline, you can recover from holiday debt. We’re here to help. Get in touch with a financial coach

If you want to be prepared and avoid using credit to pay for this year’s holiday spending, consider opening a Christmas Club account. With easy payroll deductions, you can track your savings amount online throughout the year and be ready for the next festive season!